Sir, thank you all so much for being here. Really appreciate the time.
Thanks, Amy.
Scott, maybe starting with you, can you kind of take us through the strategic transformation at a high level? And I think as you, as you look forward, kind of what are the priorities for the company for the next few years, and, you know, what are kind of the keys to delivering kind of sustainable growth over time?
So, first of all, I just wanna say that, just a reminder that I'm gonna say some forward-looking things. We are, you know, towards the end of Q2 here, so I won't be talking about Q2 or any changes or movement on our guidance. So, when I look at 2024, I think it's a little bit of a transition year for us. You know, we are finishing our divestitures, and we're moving into phase II of the strategic plan. When I think about where we are, I'm very, very pleased with where the company is. We delivered a very strong Q1, and at the same time, delivering strong financial results. We are executing on all our strategic imperatives, right? We're close to getting our divestitures done.
We've announced two that have closed, and we're hopefully close to a third in the next few weeks. So hopefully that'll be done, and we'll move forward from that. At the same time, we're returning capital to shareholders through share buybacks and through the dividend. We've bought back $250 million in shares in the first quarter. So we're returning capital to shareholders. We've also invested and brought in some key assets, which could be drivers for the future. I think these are very, very important cornerstone assets, and I think they're very important for patients. They're focused on areas of very high unmet medical need, but they also could be very important cornerstone products for our revenue growth going forward in the future.
So we're very excited about those two assets that we brought in from Idorsia. And I'm sure Philippe and others are... We're gonna talk a little bit more about those products-
Yeah.
Cenerimod and selatogrel, which again, I think could be really transformational assets for patients and for the company and the finances. We've also brought in some new skill sets into the company. I think there was a fantastic group of executives who were here when I got here 14, 15 months ago, and a lot of them have stayed, but we've needed to sprinkle in some new skill sets. You see on the stage, we've got Doretta, we've got Philippe, both of whom have, you know, tremendous experience in the space. Philippe has developed a number of blockbuster drugs and innovative products, so it's very good to have him on the team.
Not with us on the stage, but sitting in the front row, Corinne Le Goff, our new Chief Commercial Officer, who joined just a couple of weeks ago, and is getting involved and has tremendous global experience in commercialization. So we started with a really good team. We've really sprinkled in some outstanding skill sets. And then, you know, sort of lastly, we've spent a lot of time strengthening and simplifying the base of the company. So if you look at all those things, paying down the debt, getting to the right leverage ratio, closing on the divestitures, bringing in new skill sets, strengthening the company, I think it puts us in a great position as we move into 2025 and beyond.
Can you kind of help investors think about, you know, what kind of ties the recent deals that you've done together, eye care, the Idorsia assets, assets you currently have in your pipeline? Kind of, you know, what's kind of the expertise that you bring and why, you know, it's these are the right assets for Viatris to have?
So I think these are very important assets for us. You know, the eye care business is a series of different assets. We have two products on the market right now. We've launched Ryzumvi, and of course, we've got Tyrvaya. We've got a pipeline of four or five late-stage assets there. So we're gonna continue to launch products in the eye care division over the next two, three, four, five years and really try and build something there. In terms of the Idorsia assets, cenerimod and selatogrel, you know, I think to me, the hardest thing in this business is finding assets that can really be blockbuster assets, that can be differentiated relative to the competition, that could be cornerstones for franchises, that you know, have got long patent protection that you can invest in over time.
So that's the most important thing to me, is that, you know, trying to find assets that really can be game changers and move the needle. I think you can always build commercial structure and distribution structure and some of those things, but those assets are what, to me, really, really are important for us to find. I think when I'm talking to companies and you know, looking for assets, the thing that companies say back to me a lot is just the strength of our footprint and the backbone that we have, commercialization perspective, for distribution, development, and others. I mean, we are commercializing in over 160 countries right now.
We reach 1 billion patients every year with our medication, and so we've got a very strong, diverse company with a very, very strong footprint globally.
I guess, how do you go about kind of finding those kind of blockbuster-type assets? You know, I think you've kind of talked in the past about, you know, preferring low risk, you know, phase III, commercial-ready products. Can you maybe just talk a little bit about the evaluation criteria the company uses to just, you know, figure out which ones have, you know, an attractive risk-return?
Yeah, I guess the way that I think about it a little bit is, you know, this is a difficult business, right? And there's risk in everything in development, right? There's always risk. But I think, well, you know, the way that I try and communicate it is what I'm looking for is sort of relatively de-risked assets. I'd like them to be, you know, at minimum, through proof of concept and in phase III. Even better if they're through phase III and have registrational data, even better if they're if they're filed or pending registration, some of those things, or even on market. So we're not looking to do science experiments. We're not looking to do early drug development here.
We're focused on late-stage, relatively de-risked assets that we think have a good chance of making it over the line.
Got it. Okay, and wanted to follow up on the divestiture. So, you know, the EU, I think, extended the deadline around the European OTC divestiture through, you know, later in June. Just any update on kind of what's needed to close that deal? 'Cause that's sort of the cornerstone of the divestiture that you're doing.
Yeah, I think we're, we're getting very, very close. I think I'm very optimistic that this will close, you know, in just a few weeks here, likely early in July. Whenever you're dealing with the regulatory process, particularly as diverse as our OTC business, I'm not sure there was something like 1,600 different products in that, in that bundle. And there's a lot of regulatory process and procedure that needs to go through that, which is a little bit out of our control. But I think we're at a place now where we definitely see the finish line. We think we have everything in place to get the deal closed, and that should close, hopefully early July is the sort of latest timeframe.
Again, with the caveat that there are external factors here, but I think we're feeling very good and very confident that we're gonna be able to close this relatively quickly. And, you know, that really sets us up, as we again, as we go into 2025, we can delever the company to a place where we want to get. And then once we do that, you know, we generate, you know, sector-leading free cash flows as a company.
You know, we have $2.3 billion-$2.5 billion a year of free cash flow in the years going forward, and we can now focus, once we get the leverage ratio to the right place, we can then focus on using that capital to, you know, continue the dividend, accelerate our share buybacks, accelerate our business development activity, and really move the company forward once we get that done. So I'm extraordinarily excited about the hard work that's been done to get the company where it is today, and I think there's a very, very bright future for the company.
Great. Maybe at this point. So how do you kind of think... Building the pipeline, R&D as a % of sales, and how that should trend? Bring to market a few, a few of these assets that I want to get into. Kind of think about that.
Yeah, so I think, you know, we have said very clearly that we have two areas of focus. One is more of that base business where, you know, we, we've said we want to continue to strengthen and we're gonna continue to develop our base business, and that's in order to bring $400 million-$500 million in new revenue every year, and we're gonna continue to do that, and we're gonna continue to invest in that business. At the same time, we said that we'll also continue to acquire assets similar to cenerimod and selatogrel, with long patent life, with durable revenues. That's our second pillar, and we're very active currently in looking for additional assets.
Sorry, please go ahead.
I was just gonna add some of these assets, yes, will require some kind of incremental investment. It is a portfolio approach to how you think about R&D, and there's also different ways in which to think about that investment. So, for example, Idorsia wasn't a straight acquisition. It was more of a collaboration. And so there's opportunity for not only both us and Idorsia to collaborate on the science and the asset, but also to share in some of those development costs as well as we think about it.
Two great points just for me to emphasize. I think we wanna, as we move into business development, we wanna take a disciplined approach to what we're doing. We wanna do things similar to what we were doing with Idorsia, find a way to do it, you know, through partnership, through licensing, to be able to access a wide variety of assets, not just straight M&A, as a way to build the portfolio and pipeline. We wanna have a very disciplined approach to it. Philippe made a great point that, you know, we need to continue to invest in the base business as well. We have, you know, $15+ billion in revenue. It's very diversified. It's a strong base.
We see, you know, through the addition of $450-$550 million a year in new products, and some degradation of the portfolio due to its age. You know, we see, you know, 1%-3% growth in that base business, and it's adding on to that with new products and new revenue streams that can really help us generate to accelerate the revenue growth.
So, you know, accelerant to that, you know, as those come to market-
Yes
... potentially.
Yes. And as we look to do more business development, you know, I would love to get some revenue that's a little nearer term as well.
Yeah.
Right? I mean, this was a unique opportunity for two potentially, you know, really multi-billion dollar blockbuster products. But we'd also like to be able to have some near-term revenue as well. So we're gonna continue, especially once we get delevered, we're gonna continue to add
Yeah
... and continue to plan and make sure we're returning capital to shareholders as well.
I guess just in this environment, obviously, you know, we heard a lot kind of yesterday about high rates, how that's impacting kind of, you know, how companies are thinking about allocating capital. You know, has it changed kind of the deal pipeline for you, the types of, you know, deals that you might be seeing as companies think about cash needs, that type of thing? You know, are you seeing more kind of biotechs kind of look for a partner potentially, and-
... Yeah, I mean, I, you know, I don't know more or less, but certainly, you know, I get inbound, I would say, every day. You know, I've got a lengthy biotech history in my background, and certainly I know a lot of biotech players, and helped start companies, and done IPOs, and I know a lot of people in that space, and I get inbound virtually every day. And I think, you know, the conundrum is, it's been a little bit of a capital-starved world in the biotech world over the last three-five years. And, you know, companies aren't in a position to be able to, you know, invest in global infrastructure very often.
And so when they come to us and they take a look at the strength of the global structure that we've got, and, 160 countries, ability to reach 1 billion patients, you know, that's something that a biotech's not gonna be able to build, right? And so, you know, that's a real significant, competitive advantage for us, I believe.
Yeah. Maybe fully going through some of the Idorsia assets, I guess, selatogrel today, you talked about the, you know, enrollment that you're targeting and, you know, kind of being, you know, a decent way into that process. I guess, can you maybe just talk about, you know, that enrollment process? What are the challenges of enrolling patients in that trial? And kind of what are the next updates that investors should expect to hear?
Right. So, you know, I think from a development standpoint, we're, and from an enrollment standpoint, we're not really having issues enrolling patients, we just need to enroll a lot of them.
Yeah.
So what we've done is, we're accelerating enrollment by basically doubling the number of sites, going into regions where, you know, Idorsia had little experience. With Viatris footprint, we're able to reach patients that typically biotech are not necessarily going after. So we're able to enroll patients faster, and we're seeing an acceleration. We think we'll see the full, we'll get a full idea on the revised timeline around next year, see how much faster we can enroll patients. But so we are basically doubling the number of sites and re-engaging with the investigators throughout the world to speed up that enrollment for selatogrel.
We think we'll be fully enrolled by the end of 2026, but again, we'll see how that progresses over the next few months with everything we've put in place.
Got it. And so, but that doesn't really assume any benefit from kind of the expansion?
Right now, that does not... That is our standard timeline-
Yeah
- right? That we've communicated from the beginning. Should we be able to speed it up, we'll, we'll be able to revise that early next year, I think.
Okay. And then I guess, you know, it's definitely a, you know, different type of drug in terms-
Yeah
- of administration.
Mm.
Can you maybe just talk about kind of level of confidence that patients will be able to kind of successfully self-administer the drug? And then, you know, I also wanted to ask about kind of the risk reduction that you're targeting, and, you know, I think you've talked about kind of 20% risk reduction, why that's sort of the appropriate level.
Right. Well, so for your first question, you know, what we've said publicly is that what we've observed to date is that patients are actually self-injecting for the right reason. They are self-injecting when they were instructed to self-inject, so within 30 minutes of the first onset of MI. The first symptoms of onset of MI, that's when they're self-injecting. So the study is progressing as well as we could possibly think. We've also reported that from a safety standpoint, which is also another key factor, the IDMC has met multiple times and has told us to continue the study unchanged. We are not seeing any signals that would change the study. So it's progressing from standpoints.
The main assumption here is to see a 20% risk reduction. That's our base. We think it's relatively conservative as a number. When you look at other trials that were done with antiplatelets against placebo on top of standard of care, you're seeing about a 30%-36% risk reduction, and that's in patients that are much further along in the process of acute MI. The whole point here is that these patients are able to self-inject very early in the process of acute MI. That's when the thrombus is platelet-rich, that's when the thrombus is responding to antiplatelet treatment in the best way possible. The more you wait, the more it becomes. There's more fibrin entering the thrombus, and it responds less to antiplatelet therapy.
So all this to say, it's the 20% risk reduction we feel is a conservative assumption, but it's, you know, the right assumption to build a phase III study design so that we are reducing the risk of failure.
As a company, I think we're uniquely skilled to be able to bring life-saving, self-administered medication globally to patients. You know, obviously, we've been very successful doing that with
Yeah
... with EpiPen and others-
Yeah
in the past. But you know, I think we're really, really uniquely positioned as a company to be able to do that well. And you know, sort of secondly, you know, the patient experience, the patient input that I get is that you know, an MI is a pretty significant life event to happen to somebody, and there's a pattern of symptoms which are very, very recognizable, and it's not very likely that somebody's gonna confuse a second MI, right? With another set of symptoms. So-
Yeah.
You know, I think the product is really, really well-positioned to be, you know, game-changing in terms of therapy of patients with acute MI.
Yeah. On cenerimod, I mean, it's a challenging disease area to treat. You know, I think the phase II data, I think, was kind of nominally statistically significant, but you had much better results in the interferon high patient cohort.
Right. Mm-hmm.
I think you're targeting, you know, 80% enrollment of those interferon high patients in the phase III trial. So I guess, is that where enrollment's tracking currently? And can you kind of talk about, you know, why that was maybe the right approach to take? And would there be any implications for kind of the indication or label that the FDA gives you based on that?
Yeah, so when you look at the more recent phase III studies that have been run with other products, and when you look at the epidemiology in systemic lupus in moderate to severe patients, 70%-80% of the patients are known to be interferon type I high. So, that 80%, it was actually 83%-85% is what was observed in the most recent phase III study in terms of the number of patients that were interferon type I high. So that's just the natural population we're going after, and we certainly expect that we'll will be in that 80%-85% range.
Should we not see that for some reason, we have ways to modify the trial to stop certain strata to make sure we enrich for those interferon type I high patients. So our goal is really to get to that 80%-85% interferon type I high patients, because that's clearly where we've seen the best results in phase II. And we've put everything in place to be able to do that. From an FDA labeling standpoint, I don't wanna necessarily surmise what FDA would do, but I can tell you what they've done with others, which is, they had 80%-85% of interferon type I high patients, but they got global labels that doesn't necessarily distinguish between interferon type I low and interferon type I high patients.
That's our expectations at this point.
I guess, you know, I think it's obviously an area where there's a lot of kind of, you know, provider expertise in terms of how to treat patients.
Yeah.
I don't want to, you know, get too far ahead of ourselves with commercialization, but just, like, how you're thinking about going to market and, you know, you guys expect it to be potentially a blockbuster drug, what it would take to kind of be commercially successful with the product?
Yeah, so I think, you know, the benefit/risk profile that we're seeing, I think there's a clear unmet need for better for drug currently in systemic lupus with a better benefit/risk profile than what's currently in the market, either the oral standard of care or even the generics, which, from a benefit/risk standpoint, have, you know, a little bit of baggage, that comes with those drugs. So having a better benefit/risk profile, we're also more convenient than these generics, and I think our phase II data clearly biologics-- I'm sorry, I said generic. Biologics, that we have certainly a better profile in phase II than what has been observed. And so we think that's key for our success going forward.
I think from a prescriber standpoint, as you said, it's highly specialized, rheumatologists that typically treat these patients. And so I'm told, because it's highly specialized, we won't require a very large sales force to be able to to manage those those rheumatologists.
Certainly, there's unmet need in SLE, without question, the way it is today.
Yeah.
But this mechanism, the S1P mechanism, immunomodulatory mechanism, one that Philippe and I are very, very familiar with, we've developed drugs with same mechanism, and there's, you know, real indication expansion opportunities, too, which help, you know, make us think of this as a blockbuster. There's proof of concept for these S1P molecules in things, you know, multiple sclerosis, IBD, psoriasis, other areas. And so, you know, we're focused on getting the initial indication-
Yeah
the initial approval. There's lots of unmet need. There's blockbuster potential just within the SLE population, but there's also tremendous indication expansion opportunities as well.
How would that work with Idorsia? Is that currently part of the agreement that you have, or would that kind of require a separate agreement-
Nope, nope
and additional cap?
That's our asset. We can develop it in any way that we want.
Okay.
Certainly part of the appeal of cenerimod is this ability and opportunity to take it to different areas and across multiple different therapeutic areas.
Okay. Doretta, maybe moving over to you. You know, Scott, kind of, you know, at the outset, talked about getting to, you know, low single-digit growth with the existing portfolio and then potentially having BD add to that. I guess, can you help us think through the path to get there? You know, I think in the first quarter, you noted some kind of unique dynamics around formulary design and rebates with some of the legacy products. Is that something that continues to kind of weigh on the business over the course of the year until you kind of lap it, and then is that when we start to see maybe an inflection in the base business growth?
Yeah. Well, first, I would say one of... As, as Scott meant, highlighted, one of the benefits of our business is the fact that we are global, well-diversified, kind of 160 countries. We're not really dependent on one market, one product to really drive that growth. And so, the way we kind of have thought, kind of, have performed, think about our business is, kind of that-... generating that $450-$550 million of new product, kind of global new product revenue every year to offset kind of ongoing normal base business erosion due to the kind of age of our, portfolio of kind of that approximately kind of $300 million. So that's what gets us to that kind of 2%, growth.
As you mentioned, in North America specifically, we did see some unique channel dynamics, specifically in the first quarter, really around our branded portfolio in North America. But taking a step back, we feel really good about our North American business. Our commercial team has done a really nice job of balancing a portfolio amongst brands, complex generics, and core generics. In our branded business, we've really have a focus on transitioning up the value chain. We've seen growth in Yupelri, we've added the eye care portfolio with Tyrvaya, launched Ryzumvi, and are seeing kind of stability in our legacy Upjohn portfolio. Within our generic portfolio, our focus has really been moving up the value chain in terms of complex generics. We've seen strength in Wixela.
We've seen strong uptake with new product launches like Breyna. We expect to continue to deliver new products in that portfolio with expected product launches kind of over the next several years. We're continuing to add to the portfolio. We've talked about the Idorsia assets there, and our focus is really to add kind of durable, higher margin, branded, protected assets to kind of migrate the business over time. So we think there's kind of significant opportunity within North America, but that is a piece of kind of the overall diversity that we have in terms of our overall portfolio.
It's been my experience in the U.S., and certainly in the branded world, that Q1 can be the most difficult to predict. There's lots of different levers which affect Q1, and so we'll see how the business evolves over the course of the year. But we feel good, as Doretta was saying, about where we are in the U.S., for sure.
Yeah. So I mean, it sounds like, you know, you're kinda close to that point where new product launches kind of outweigh the base business erosion, and that's kind of what allows you to get back to that, you know, kind of low double-digit growth on the core.
Absolutely. And we, we have been delivering $450-$550 million for the last three years in new product revenue, and we see a line of sight to continuing that 2024, 2025, 2026, and beyond. That sort of stabilizes the base business erosion.
Yeah.
We believe that we're gonna be adding more in new products in the year than the base business erosion-
Yeah
... on going forward basis. So that's a great, stable sort of base to build off of, and then adding, you know, sort of longer, innovative, stickier revenue streams to that, you know, can really then help move us away from low single digits and beyond, and really accelerate growth, as we move forward here. That's the revenue growth. That's the-
Yeah.
That's the plan.
Yeah.
But it requires us to have a, you know, continue to invest and have a great, stable business as our base and find the right assets to add to it.
Yeah. Can I ask on generic pricing, in U.S. generic pricing specifically? I know it continues to go down in terms of, you know, % of sales, but I think you have good perspective on it. I guess, do you feel like we've seen any structural changes in the market that would maybe make that more favorable on a sustainable basis, whether it's fewer manufacturers participating, a bit more focus on, you know, security of supply, that type of thing, that would shift it from what I think investors are used to historically?
It's... Generics is still a very complex market, but we have seen, to your point, an evolution in some of the market dynamics. That's been twofold. One, that's been driven by kind of actions we have taken as a company in terms of just portfolio mix, kind of, focusing on the complex side and kind of how we think about the portfolio, generally. But there's also been an evolution in the industry, and I think, appreciation by our customers, et cetera, that it's not just about the kind of what price you can get, but it's about the durability of supply, as well.
We have seen a more of a rationalization as it comes to generics, that there's a lot of factors that play into it. It has to do with kind of the portfolio, demand-supply dynamics, et cetera. But we kind of continue to see kind of price erosion in that kind of mid-single digit range, consistent to generally, I think, what the industry is seeing as well.
The other question I kind of wanted to ask on the developed markets business is kind of post the divestiture of the OTC business, how should investors be thinking about, like, the longer term growth profile for Europe?
Europe continues to be a very stable business for us, and the growth profile actually of the OTC business that we're divesting is consistent with how we see the overall Europe business. So pro forma, kind of as we think about Europe, we continue to see this as a kind of ±3% grower, and that's really driven by strength in our branded portfolio. We continue to see strengths in our generic portfolio. Italy and France continue to be strong markets for us, and just the diversity, kind of stability, and kind of base that we have in Europe.
Yeah. And I want to also ask on China. I feel like a lot's changed since the Upjohn transaction. Could you maybe just talk about how you see the market today, and is it any different in terms of, you know, uptaking the retail channel? Obviously, a lot of your drugs have gone through VBP, so there's not really like that overhang anymore, but just the, the level of growth that you would expect from that market.
Yeah. I mean, China is a very large important market, but there's also a number of kind of dynamics that occur in that market. We and the team have really focused on the commercial kind of execution in that business, and the business continues to perform. We feel good about the execution that we've seen in the market, and the business continues to perform kind of in line with our expectations. This is a important portfolio with products that have significant brand equity in the market. And so kind of we're focused on continuing to drive execution, but at the same time, kind of managing a very complex and dynamic regulatory environment as well. And-
And-
Go ahead.
No, no, please.
And the only thing I was gonna add is we have the opportunity, especially with some of the assets that we've talked about on Idorsia, with selatogrel in particular, where kind of to really add to the portfolio over time in the region as well.
Yeah, despite the macroeconomic and policy challenges in China, we're very, very pleased and proud of the group there. There's really strong leadership. There's a good group of people there. It's a very important affiliate for us, and they're doing very well. And again, it can be a challenging environment, and an unpredictable environment, an asymmetric application of policy and things, but we're very, very pleased with where that particular affiliate is for us right now.
Great. We have about a minute left. Maybe, Scott, just to wrap up, what kind of... where the company, you know, is trading right now and where valuation is, I guess, how would you frame maybe where—what you think investors are missing with the story?
Yeah, so I sort of view it not necessarily as what they're missing, but what's underappreciated about the company, right?
Sure.
I think the things that are underappreciated about the company is we have a very, very strong global footprint, as we've talked about a number of times here, commercializing in over 160 countries, reaching 1 billion patients every year. It's tremendous scope and reach that we have as a company, an amazing opportunity to affect human healthcare moving forward, which is, I think, very much underappreciated. I think the strength of our balance sheet is very much underappreciated. I think it's, I think our really near-term line of sight on getting the the right leverage ratio, you know, is a little bit underappreciated.
We have sector-leading free cash flows, and post, you know, with, with that short line of sight on getting to the right leverage ratio, we're gonna be able to be more aggressive in returning capital to shareholders, maintaining the dividend, accelerating share buybacks, and we're gonna be able to be more aggressive in terms of disciplined business development to build the portfolio as well, right? And I think the other thing is, you know, we've assembled a really good group of people who have tremendous experience in the branded area of the pharmaceutical world, who are able to identify, we're able to acquire, to develop and commercialize the assets, including, you know, people you see... deliver on the base business and deliver on the new branded innovative side is a little bit underappreciated as well.
So, you know, again, I see all the hard work that's been done and the way how stable the company is gives us a very, very nice launchpad as we move into 2025 and beyond and get into really sort of the part two of our strategic plan. And, we've lived up to all those commitments, and I think the company is in great, great shape to move forward.
Great. Well, thank you all very much for your time. We really appreciate it.
Thank you, Nathan.
Thank you.
Enjoy the rest of the day.